I've built a bunch of Smelteries, one of my favorite early-game ore doubling mechanisms. As far as I know, the controller can be at any level, but the overall structure won't activate until there is a contiguous wall that includes the controller, around the base floor. I've put controllers on the first row of blocks (above the floor layer, that is), and all the way up to layer 3 or 4.
To save on smeltery blocks I usually use columns of marble or granite for the corners, or make the corner columns out of seared tanks. As long as a tank is anywhere in the structure, the controller seems to "see" it. You can actually make non-square smelteries, but the extra spaces outside of the square aren't useable, they show as red X's in the controller gui. On the plus side, you can add height to your Smelter at _any_ time for more ore handling capacity. I've built them up into the ceiling of my base, even had a mob trap drop right into one for congealed blood ingots.